Magna posts $50.7M loss for quarter

Magna Entertainment Corp., the racetrack owner and operator, lost $50.7 million in the third quarter of 2006 on revenue of $113.7 million, according to financial statements released Thursday.

The third-quarter results compared with a loss of $34.5 million in the third quarter of last year on revenue of $78.8 million. In the third-quarter this year, operating costs and interest expense were up sharply from the third quarter last year.

Magna is the largest racetrack operator in the United States, and owns Santa Anita Park in Southern California, Gulfstream Park in Florida, Golden Gate Fields in northern California, Lone Star Park in Texas, and other tracks. For the nine months ended Sept. 30, the company has lost $68.3 million, compared with a loss of $77.4 million in the first nine months of 2005.

Magna had negative cash flow of $4.8 million in the quarter, compared with a negative cash flow of $19.9 million in the third quarter of 2005. During the quarter, the company added $25 million in debt and took an advance of $6.3 million from its parent company, MI Developments. Separately, it paid off $4.1 million in debt, for a net of $27.2 million in debt obligations.

Magna has struggled to turn a profit for the past four years, and is heavily burdened by $516 million in long-term debt, including $164 million due to MI Developments. Interest payments in the third quarter were $16.6 million, compared with $8.5 million in the third quarter last year.

Magna is expected to close on the sale of its Meadows racetrack in Pennsylvania to casino developers this year. Proceeds from the $200 million transaction are expected to be used to pay down the company's debt to MI Developments.

Magna's revenue from slot machines at its Remington Park in Oklahoma were $13.6 million. That revenue was offset by $6.5 million in gaming taxes and purse obligations, according to the financial statements. The casino began operating in November of last year.

Magna is expected to open a casino later this year at Gulfstream. The company has been aggressively pursuing slot machines at its other tracks. During the quarter, it spent $900,000 in Ohio in order to lobby for a gambling referendum legalizing slots at racetracks, including its Thistledown. The referendum is on the November ballot.

Magna said in its financial release that it has sold a golf course in Austria to Magna International Inc., the auto-parts company headed by Magna Entertainment's founder, Frank Stronach, for $38.3 million. Magna Entertainment will receive $16.8 million in cash for the sale, and Magna International will take on $21.4 million of Magna Entertainment's debt. The sales proceeds will be recognized in the fourth quarter, the release said.